Online advertisements could get costlier with the equalisation levy (EQL) or the so-called “Google Tax” kicking in from Wednesday. Another budget proposal, the Direct Tax Dispute Resolution Scheme, which offers a window for companies to settle existing tax disputes, pending in courts and arbitration, will also come into effect from June 1.

A slew of budgetary proposals, including 0.5 percent agriculture cess on all services and a 4-month disclosure scheme for domestic black money holders to come clean, will kick in from Wednesday. (File Photo)

A slew of budgetary proposals, including 0.5 percent agriculture cess on all services and a 4-month disclosure scheme for domestic black money holders to come clean, will kick in from Wednesday.

The Equalisation levy of 6% on cross border digital transactions and a one time settlement tax scheme for resolving disputes emanating from retrospective amendments to the Income Tax Act will also come into effect from Wednesday.

What the agriculture tax is all about

With the imposition of Krishi Kalyan Cess (KKC), the total incidence of service tax will increase to 15 percent, thus making eating out, phone usage, air and rail travel, expensive.

A hike in the tax will push up retail prices of almost all everyday products, and services such as air travel, restaurant meals, movie tickets, telecom and DTH services and credit card, electricity and mobile bills.

The 4-month Income Declaration Scheme provides one time opportunity to domestic black money holders to come clean by paying tax and penalty of 45 percent on such assets will open on Tuesday too. However, the scheme is not meant for those who have earned money through corruption.

Last year the government had launched a similar scheme giving opportunity to people having unaccounted assets abroad to come clean by paying taxes and penalty.

The Equalisation levy or ‘Google tax’ in common parlance will apply only on payments relating to online advertisements. Last month, Internet and Mobile Association of India (IAMAI) had said that levy on online advertisement revenue of foreign companies would “severely raise the cost of doing business” for Indian tech startups.

Another major budgetary proposal, the Direct Tax Dispute Resolution Scheme, which seeks to resolve cases pending in various courts, tribunals, arbitrations or are in mediation under the Bilateral Investment Protection Agreement (BIPA), will take effect from Tuesday.

The scheme provides an opportunity for settlement of cases emanating from retrospective amendment of tax laws, by asking companies to pay the basic tax demand and get waiver on interest and penalty.

Experts view the scheme as a big step towards tax reform and hope that it would act as a breather for companies like Vodafone and Cairn, which have been facing multi-billion dollar tax liability following retrospective tax amendments made in 2012.